Shares of Uranium miner and processor Uranium Energy Corp. (UEC 3.19%) rallied 13.6% this week through Thursday at 1 p.m. ET, according to data from S&P Global Market Intelligence.
As is often the case with commodity companies, geopolitical tensions and negative events can actually be beneficial for certain stocks, making commodity plays somewhat of a hedge against global disasters and inflation.
That was the case this week, as tensions with Russia led to concerns about uranium supply disruption to U.S. nuclear plants.
Going nuclear has benefits and costs
Due to the surging demand for electricity, especially for new artificial intelligence data centers, nuclear energy has been a hot topic again. However, the prospects for nuclear energy ran into a roadblock this week.
Last Friday, Russia made a statement on Telegram that it would be limiting exports of enriched uranium to the United States. That’s a big deal, as uranium is one of the few commodities the U.S. still purchases from Russia, which supplied about a quarter of the U.S.’s enriched uranium last year.
Russia said the move was in response to a ban on Russia-enriched uranium signed by President Joe Biden back in May, which is supposed to take full effect in 2028. Additionally, the move nearly coincided with the Biden administration allowing Ukraine to use U.S.-made weapons to strike inside Russia. That announcement was made just days later on Monday.
Whatever the exact reason, Russia throttling the supply of enriched uranium benefited non-Russian sources of uranium, such as Uranium Energy Corp. UEC had smartly bought up a bunch of smaller uranium miners between 2017 and 2023, when uranium prices were low, and is now the largest U.S.-based uranium miner in terms of capacity. The company also has production assets in Canada and Paraguay.
No revenue… yet
It should be noted that UEC didn’t actually make any revenue last year, as it is still committing capital to build its resource base and low-cost extraction capabilities. The company is also unhedged, making it a pure-play, leveraged bet on future uranium prices.
But with demand for nuclear energy likely to be higher in the future and supply a bigger question mark now thanks to Russia’s latest moves, that bet is paying off this week.
Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.